Today when everyone is looking to save tax in private scheme, New Pension Scheme can be lucrative yet ignored tax saving instrument. You can save in addition to Rs 1,00,000 when you invest in new pension scheme. Let’s see briefly what exactly this scheme is and how it can be worth investing in this scheme.
About NPS
New pension scheme is a contribution scheme which is regulated by Pension Fund Regulatory and Development Authority. Not only Indian citizens but also NRIs can avail this scheme and the age limit for being a part of this scheme is 18 to 60 years.
With new pension scheme, one has an active option to decide in which manner their money invested in NPS should be investment. In other words, it is possible to choose in which fixed income instruments, or equity market instruments or government securities one can invest in. Under new pension scheme, the investment in equity market related instruments is restricted till only 50 percent of total money invested whereas it is 100 percent in case of fixed income instruments as well as government securities.
Under new pension scheme one also has the option of auto choice which also people who don’t have any knowledge to manage their investment. When one opts for this option, the money they invest in new pension scheme in invested in fixed income instruments, equity market instruments as well as government securities as a pre-defined portfolio which is decided by the age of participant.
Types of accounts
New pension scheme offers two different types of accounts which are called: Tier-1 accounts and Tier-2 accounts. In case of Tier-1 accounts, withdrawals are not allowed during the duration of vesting period whereas there is no restriction on amount of withdrawals from Tier-2 accounts. The best feature of new pension scheme is that it gives flexibility to do any amount of contributions in these two different accounts. However, there is a minimum contribution to be made. It is Rs 6000 per annum in case of Tier-1 account and Tier-2 account contribution has to be Rs 250 minimum. These accounts can be opened for a sum of Rs 500 for Tier-1 and Rs 1000 for Tier-2 account. Also, one has to be careful regarding minimum balance of Rs 2000 should be maintained or fine of Rs 100 will be charged.
New pension scheme and Tax Saving
For most of people, they can only save Rs 1 lakh under Section 80 C and many few people are aware of the fact that they can save more than section 80CCD (2). Under this section, up to 10 percent of basic salary of employee can be put up in new pension scheme, it is considered as tax deductible. This means that a person whose basic salary is Rs 5,00,000, that can get additional deduction of Rs 50,000 if his/her employer puts money in his behalf in new pension scheme. This way, you can save a lot of money (around 15,000 if you come under 30 percent tax bracket).
About NPS
New pension scheme is a contribution scheme which is regulated by Pension Fund Regulatory and Development Authority. Not only Indian citizens but also NRIs can avail this scheme and the age limit for being a part of this scheme is 18 to 60 years.
With new pension scheme, one has an active option to decide in which manner their money invested in NPS should be investment. In other words, it is possible to choose in which fixed income instruments, or equity market instruments or government securities one can invest in. Under new pension scheme, the investment in equity market related instruments is restricted till only 50 percent of total money invested whereas it is 100 percent in case of fixed income instruments as well as government securities.
Under new pension scheme one also has the option of auto choice which also people who don’t have any knowledge to manage their investment. When one opts for this option, the money they invest in new pension scheme in invested in fixed income instruments, equity market instruments as well as government securities as a pre-defined portfolio which is decided by the age of participant.
Types of accounts
New pension scheme offers two different types of accounts which are called: Tier-1 accounts and Tier-2 accounts. In case of Tier-1 accounts, withdrawals are not allowed during the duration of vesting period whereas there is no restriction on amount of withdrawals from Tier-2 accounts. The best feature of new pension scheme is that it gives flexibility to do any amount of contributions in these two different accounts. However, there is a minimum contribution to be made. It is Rs 6000 per annum in case of Tier-1 account and Tier-2 account contribution has to be Rs 250 minimum. These accounts can be opened for a sum of Rs 500 for Tier-1 and Rs 1000 for Tier-2 account. Also, one has to be careful regarding minimum balance of Rs 2000 should be maintained or fine of Rs 100 will be charged.
New pension scheme and Tax Saving
For most of people, they can only save Rs 1 lakh under Section 80 C and many few people are aware of the fact that they can save more than section 80CCD (2). Under this section, up to 10 percent of basic salary of employee can be put up in new pension scheme, it is considered as tax deductible. This means that a person whose basic salary is Rs 5,00,000, that can get additional deduction of Rs 50,000 if his/her employer puts money in his behalf in new pension scheme. This way, you can save a lot of money (around 15,000 if you come under 30 percent tax bracket).
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